Initial Direct Costs/Revenues (IDC/IDR)

Initial Direct Cost / Revenue

Some of these calculations will vary according to customization parameters established in Portfolio Maintenance [U0212].

Initial Direct Costs/Revenues

Initial Direct Costs

Initial Direct Revenue

Initial Direct Cost/Revenue Summary

 

Initial Direct Costs/Revenues

Initial direct costs are incurred related to the negotiating and closing of lease transactions. Initial direct revenue is income due to the lessor at lease commencement. Initial direct costs and revenue may be amortized over the life of the lease or charged against income as incurred (at lease commencement) with a portion of unearned income equal to the IDC/IDR recognized as income in the same period (lease commencement).

Initial Direct Costs

When a new lease is booked, initial direct costs are automatically calculated and displayed on the payment option screen. They are also printed out on the New Lease Audit report [U0101A] and stored on the Master Financial (RLS) file. Initial direct costs consists of the sum of the following items:

• Broker fee, if applicable,
• Allowance for bad debt, if applicable
• Documentation fees OR a calculated percentage or fixed amount

Note that if a documentation fee is entered, the calculated percentage or fixed amount is not included in the total initial direct costs. If a documentation fee is not entered, the calculated percentage or fixed amount is added to the total initial direct costs. Documentation fees are an additional cost to the lessee. The calculated percentage/fixed amount does not affect the lessee's actual cost.

Two additional IDC elements are entered and tracked separately. They are not included in the Book IDC nor Tax IDC calculations. IDC1 is named Insurance Premium and IDC2, Notary Fee. Those field names may be customized. Both amounts are disbursed to a broker with a corresponding Disbursement Type code on the New Lease [U0101], Check Disbursal screen.

For leases with "*PX*" type accrual methods, the AMR2 IDC method IDC/IDR amortization will use the Income over the Lease Term. The Unearned Income will be equal to the Total Contract Receivable - Principal.

Leases with *PX* accrual methods will perform income adjustments during accruals so that the Total Income matches the Total Amount Received.

Earned IDC/IDR will be calculated as follows:

Unearned IDC/IDR amount * (Earned Income/Remaining Unearned Income)

Example:

12 month RPX0 lease
Commencement date 1/1/2001
Cost = $10,000.00
Rate = 10%
Monthly Payments = $1,100.00 for 12 month

First month
IDC_RATIO = 83.33/3200.00
Earned IDC = 1100*IDC_RATIO= 28.64

Second month
IDC_RATIO = 74.86/(3200.00 - 83.33)
Earned IDC = (1100 - 28.64)*IDC_RATIO= 27.11
Earned IDC will be calculated based on the interest earned in table below:

Due Date	Payment	Interest	Principal	Outst Principal
				10000.00
2/1/2002	1100.00	83.33	1,016.67	8,983.33
3/1/2002	1100.00	74.86	1025.14	7958.19
4/1/2002	1100.00	66.32	1033.68	6924.51
5/1/2002	1100.00	57.70	1042.30	5882.22
6/1/2002	1100.00	49.02	1050.98	4831.24
7/1/2002	1100.00	40.26	1059.74	3771.50
8/1/2002	1100.00	31.43	1068.57	2702.92
9/1/2002	1100.00	22.52	1077.48	1625.45
10/1/2002	1100.00	13.55	1086.45	538.99
11/1/2002	1100.00	4.49	1095.51	-556.51
12/1/2002	1100.00	-4.64	1104.64	-1661.15
1/1/2003	1100.00	2761.15	-1661.15	0
Unearned Income		3200.00

In Mid-term Adjustments, Payoffs, Asset Add-On and Payment Reschedules, the remaining unearned income is adjusted based on the remaining contract receivable and the outstanding principal.

Using the above example, after 7/1/2002 is accrued, the Payment Schedule is $1000.00 and an additional two months is added to the term. Then the new remaining unearned income will be calculated as follows:

Due Date	Payment	Interest	Principal	Outst Principal
				10000.00
8/1/2002	1100.00	31.43	968.57	2802.93
9/1/2002	1100.00	23.46	976.64	1826.29
10/1/2002	1100.00	15.22	984.78	841.51
11/1/2002	1100.00	7.01	992.19	-151.48
12/1/2002	1100.00	-1.26	1001.26	-1152.74
1/1/2003	1100.00	-9.61	1009.61	-2162.35
2/1/2003	1100.00	-18.02	1018.02	-3180.37
3/1/2003	1100.00	4180.37	-3180.37	0
Unearned Income		4228.50

Earned IDC on 8/1/2002 = Unamortized IDC * 31.43/4228.50

The AMR2 IDC method with an *IF* type accrual method, will calculate that yield accordingly and allow comparison to the fixed rate entered.
The floating rate (Principal + Interest) Interest Bearing; IDC/IDR amortization uses income over lease term for IDC/IDR amortization. The estimated Unearned Income will be calculated and stored. Earned IDC/IDR will be calculated as follows:

Unearned IDC/IDR amount * (Earned Income/Remaining Estimated Unearned Income)

Both IDC1 and IDC2 are amortized following the rules according to the accrual type on the lease.

There are several options for the calculation of initial direct costs on LeasePak:

• Calculate or do not calculate initial direct costs.
• Calculate initial direct costs based upon:
  • A fixed amount as specified through the Portfolio update [U0212] New Lease,
  • A percentage as specified through the Portfolio update [U0212],
  • A fixed amount if the lease classification indicates a vehicle; a percentage otherwise.

If a percentage is calculated, then the percentage may be applied to any of the following items:

• Unearned income (except for operating leases)
• Total original acquisition cost
• Contract receivable (including advance payments)

The following items are established through the Portfolio update [U0212] New Lease:

• INITIAL DIRECT COST METHOD
• This method indicates whether to calculate initial direct costs. If calculated, it also indicates whether to use a fixed amount, percentage, or a fixed amount or percentage based upon the lease classification.
• INITIAL DIRECT COST AMOUNT
• If calculating IDC based upon a percentage, this method indicates whether the calculation should be based upon unearned income, acquisition cost, or contract receivable. For an operating lease type, no calculation is performed if the amount is based upon unearned income or contract receivable, and the lease is set up with a month-to-month payment schedule.
• INITIAL DIRECT COST% (EQUIPMENT)
• If calculating IDC based upon a percentage, this is the percentage used.
• INITIAL DIRECT COST AMOUNT (AUTO)
• If calculating IDC based upon a fixed amount, this is the amount used.
• BAD DEBT INCLUDED IN INITIAL DIRECT COST
• This parameter indicates whether to include bad debt expense as a component of IDC. If Y, bad debt expense is included in IDC when the IDC accounting method is INCM. If N, only broker fees and documentation fees/calculated amount are included in IDC.
• CALCULATE IDC W/O BROKER FEES OR BAD DEBT
• This parameter indicates whether to exclude broker fees and bad debt expense as components of IDC. If Y, only documentation fees/calculated amount is included in IDC. Broker fees and bad debt expense are not included. If Y, the value of the parameter BAD DEBT INCLUDED IN INITIAL DIRECT COST should be set to N.

 

Initial Direct Revenues

IDR is not a calculated total. Four fields on a new lease contain income amounts which are considered initial direct revenue.

• INSURANCE FEE
• IDR1 is named Insurance Fee. The name may be customized on the Custom General table [U0712], Field Customization. If insurance premium to be paid to a broker was entered for an asset, the Insurance Fee field will display a percentage of the premium as Insurance Fee receivable. The percentage is established on the Portfolio update [U0212], New Lease customization. Insurance fees create a receivable in LeasePak's G/L, but that receivable does not appear on lessee invoices. An example of insurance fee is a processing fee received by the lessor from an insurance company. When the fee is received, it can be recorded with a manual General Ledger Adjustment [U0121].
• REGISTRATION FEE
• IDR2 is named Registration Fee. The name may be customized on the Custom General table [U0712], Field Customization. This field creates a receivable for a new lease which is billed on the first invoice. A corresponding Assessment Type for IDR2 may be established. Payment can be applied to the assessment via normal Payment Processing [U0102].
• VENDOR SUBSIDY
• IDR3 is named Vendor Subsidy. The name may be customized on the Custom General table [U0712], Field Customization. An amount is entered on New Lease [U0101] or Application [U0801] screen 3. Vendor Subsidy creates a receivable in LeasePak's G/L, but that receivable does not appear on lessee invoices. An example of the field's use is a sales assistance fee received from the equipment vendor. When the fee is received, it can be recorded with a manual General Ledger Adjustment [U0121].
• OPENING COMMISSION
• IDR4 is named Opening Commission. The name may be customized on the Custom General table [U0712], Field Customization. This field creates a receivable for a new lease which is billed on the first invoice. A corresponding Assessment Type for IDR4 may be established. Payment can be applied to the assessment via normal Payment Processing [U0102].

 

IDC/IDR Summary

Following is the summary explaining to which LeasePak functions each IDC and IDR applies to:

Summary of IDC Fields:

IDC

Base System

(1) Include in the Base Payoff Amount

Offset Account

Receivable Account

Payable Account

Disbursed using Disburse Check

Disbursed through Dealer Statement

Alternate Accounting

(4) 2 Full Payment Restriction

Prorate Module

Option to Exclude in Yield

(2) Informational IRR/NPV Rates

(3) Configurable/Income or Amortization

Notes

Book IDC

x

x

x

x

x

x

Book IDC (Broker Fee)

x

x

x

x

x

x

x

IDC1 Insurance Premium

x

x

x

x

x

x

x

IDC2 Notary Fee

x

x

x

x

x

x

x

IDC3 Fixed Rate Reserve

x

x

x

x

IDC4 Standard Reserve

x

x

x

x

IDC5 Guaranteed Reserve

x

x

x

x

x

IDC6 Dealer Bonus

x

x

x

IDC7 Dealer Reserve

x

x

x

IDC8 Reserves

x

x

x

x

x

IDC9 Reserves

x

x

x

x

x

IDCA Reserves

x

x

x

x

x

IDCB Reserves

x

x

x

x

x

IDCC Reserves

x

x

x

x

x

IDCD Reserves

x

x

x

x

x

IDCE Reserves

x

x

x

x

x

IDCF Reserves

x

x

x

x

x

IDCG Reserves

x

x

x

x

x

IDCH Reserves

x

x

x

x

x

IDC - ASC 842

x

x

x

x

 

Summary of IDR Fields:

IDR

Base System

(1) Include in the Base Payoff Amount

Offset Account

Receivable Account

Payable Account

Disbursed using Disburse Check

Disbursed through Dealer Statement

Alternate Accounting

2 Full Payment Restriction

Prorate Module

Option to Exclude in Yield

(2) Informational IRR/NPV Rates

(3) Configurable/Income or Amortization

Notes

IDR1 Insurance Fee

x

x

x

x

x

x

IDR2 Registration Fee

x

x

x

x

x

x

IDR3 Vendor Subsidy

x

x

x

x

x

x

IDR4 Opening Commission

x

x

x

x

x

x

IDR5 Subvention

x

x

x

IDR6 Dealer Buydown

x

x

x

Offset account is definable in U0212MI

IDR7 Credit Life Insurance 1

(4)

(5)

x

(6)

Only Payable G/L account created in U0103 Payoff

IDR8 Credit Life Insurance 2

(4)

(5)

x

(6)

Only Payable G/L account created in U0103 Payoff

IDR9 Credit Dis. Insurance 1

(4)

(5)

x

(6)

Only Payable G/L account created in U0103 Payoff

IDRA Credit Dis. Insurance 2

(4)

(5)

x

(6)

Only Payable G/L account created in U0103 Payoff

IDRB Acquisition Fee

x

x

Offset account is definable in U0212MI

IDRC Warranty Insurance

(4)

(5)

(6)

Only Payable G/L account created in U0103 Payoff

IDRD Subvention 1

x

x

IDRE Subvention 2

x

x

IDRF Subvention 3

x

x

IDRG Subvention 4

x

x

IDRH Subvention 5

x

x

 

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